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Reichenbach agt. Winkhaus et al.

given by statute which no court can by rules or otherwise limit or adjudge.

It follows that the order appealed from must be reversed, with costs, and the application for a preference must be granted.

N. Y. COMMON PLEAS.

M. L. REICHENBACH agt. FREDERICK WINKHAUS et al.

Assignment-When void, and will be set aside as such.

An insolvent assignment reserving to the assignor power of revocation, is void in judgment of law.

Any purpose of the assignor which would render the assignment legally fraudulent if contained in the deed, is equally effective if shown by other proof.

The deposit of the assignment with a stranger, after complete execution, to hold until receipt of further orders from the assignor, or to file when, in the judgment of the depositary, it should be for the best interests of all creditors, is a clear reservation of the power to revoke, rendering it void.

Equity Term, June, 1884.

ACTION by judgment creditor to set aside general assignment for the benefit of creditors.

It appeared from the evidence that the assignor, Spethmann, being insolvent, and intending to go to Europe to see his creditors, executed an assignment for the benefit of his creditors, without preferences, which was dated and acknowledged by both the assignor and assignee on March 19, 1883. The instrument contained the usual acceptance of the trust by the assignee. The assignment was not delivered at the time, and was not intended by the parties to take effect as an assignment on the date thereof, but was retained by the assignor and by him handed to his attorney, with the express direction to keep it until further orders from him, or until

Reichenbach agt. Winkhaus et al.

said attorney thought necessary to file it for the best interest of all the creditors. The assignor sailed for Europe on March 21, 1883, and immediately thereafter the plaintiffs began an action and obtained an attachment therein against the property of the debtor Spethmann, on the ground of his non-residence. After the levy of the attachment the assignment was first delivered by the assignor's attorney to the assignee, and was thereupon filed. The attachment was subsequently vacated on technical grounds. It appeared also that the whole stock in trade of the assignor had, prior to the assignment, been consigned to the firm of which the assignee was a member, and was held by them for sale on commission and as security for advances made thereon.

Frankenheimer & Rosenblatt, for plaintiffs.

Chamberlain, Carter & Hornblower, for defendant Winkhaus.

Henry Grasse, for defendant Spethmann.

BEACH, J.-A prompt decision of this case seems desirable, because, if postponed, long delay will unavoidably result. For that reason my conclusion is briefly stated without argument. An insolvent assignment, reserving to the assignor power of revocation, is void in judgment of law (Riggs agt. Murray, 2 Johns. Ch., 565; S. C., 15 Johns., 571). Any purpose of the assignor which would render the assignment legally fraudulent if contained in the deed, is equally effective if shown by other proof (Gasherle agt. Apple, 14 Abb. Pr. R., 61). The deposit of the assignment with a stranger, after complete execution, to hold until receipt of further orders from the assignor, or to file when, in the judgment of the depositary, it should be for the best interest of all creditors, is a clear reservation of the power to revoke, rendering it void. There may be another reason, in that no immediate delivery, followed by an actual and continued change of possession of the VOL. LXVII

65

Selligman et al. agt. Wallach et al.

assigned estate, did or under the circumstances could take place. The title to the property passed upon execution by the assignor and acceptance by the assignee (Cruat agt. Sedg wick, 1 Barb., 210; Butler agt. Stoddard, 7 Paige, 163; S. C., 20 Barb., 505).

Decree for plaintiff, with costs.

N. Y. SUPERIOR COURT.

JAMES SELLIGMAN et al. agt. ABRAHAM WALLACH et al.

Supplementary proceedings — Examination of debtors who have made an assignment for the benefit of creditors not to be restricted to property acquired since the assignment-Code of Civil Procedure, sections 2435, 2436, 2460.

The examination of debtors in supplementary proceedings, who had made an assignment for the benefit of creditors should not be restricted to property acquired by them since the assignment, but may cover an inquiry "concerning their property," whether equitable or legal, including their property transferred to another with the apparent intent to hinder, delay or defraud their creditors.

Special Term, October, 1884.

O'GORMAN, J. — Defendants being examined in supplementary proceedings under section 2435 of the Code, claim that the examination should be restricted to questions relating to property acquired since the general assignment for the benefit of creditors. In this assignment the wife of one of the defendants and the daughter of the other defendant are preferred to amounts reaching in the aggregate $82,000, constituting the bulk of the assets of the defendants. I do not think that such a restriction would be proper. The sections of the Code authorizing the examination of a judgment debtor provides that he may be required to attend and be examined "concerning his property" (Secs. 2435, 2136). The attitude of the parties in such cases is this: the creditor

Selligman et al. agt. Wallach et al.

has exhausted the ordinary remedies and means to collect his debt by judgment and execution - neither the sheriff nor he can discover any property subject to levy without examination of the debtor himself. The law gives the creditor the right to examine the debtor "concerning his property," meaning thereby such property as could not be discovered, and which has been overlooked or hidden or put beyond the reach of creditors. It is an inquisitorial proceeding and was meant to be so.

An assignment for the benefit of creditors, so-called, is too frequently an expedient of dishonest debtors and in order to hinder, delay and defraud creditors, and when made with that intention, the title to the property does not vest in the assignee, but is still, in equity, the property of the debtor and subject to levy under execution. The claim that the mere fact of the debtor's having made a general assignment of his property, stops all further inquiry on the part of the creditor in these proceedings, seems to me untenable and inconsistent with the manifest purpose of these proceedings. Such seems to be the opinion of the court of appeals in Lathrop agt. Clapp (40 N. Y., 33). In Mechanics and Traders' Bank agt. Healy (14 Weekly Dig., 120), the creditor was allowed to show by examination of the debtor in supplementary proceedings that a purchase of the debtor's property was not made in good faith. Property of the judgment debtor, which had become vested in the assignee under a valid assignment, cannot, of course, be reached by these proceedings. It had ceased to be the property of the debtor. But if the assignment bears on its face, or in the circumstances of its execution, any of the ordinary and manifest indications of fraud, then by examination of the judgment debtor it can be shown that the assignment is not valid. The question whether or not the assigned property is not still the property of the debtor is in doubt, and the examination may be directed to that inquiry.

The provisions of section 2460 of the Code, which protect the judgment debtor against the use of his evidence of hie

Hurd agt. Hannibal and St. Joseph Railroad Company.

own complicity with any fraudulent transfer of his property in criminal proceedings against him, seemed further to sustain the opinion I have above expressed, and I hold, for the purposes of this motion, that the examination of the defendants in this case must not be restricted to property acquired by them since the assignment, but may cover an inquiry "concerning their property," whether equitable or legal, including their property transferred to another with the apparent intent to hinder, delay or defraud their creditors. The scope, and extent, and nature, and mode of that examination must be subject to the control and direction of the judge or referee before whom the examination is taken.

SUPREME COURT.

JOHN HURD, арpellant, agt. THE HANNIBAL AND ST. JOSEPH RAILROAD COMPANY, respondent.

Undertakings on appeal —Guaranty of, by Fidelity and Casualty Company of New York, approved.

The Fidelity and Casualty Company of New York, under the authority of chapter 486 of the Laws of 1881, being incorporated under the general laws of the state, and authorized to transact business by way of guar anteeing the fidelity of persons holding positions of public or private trust, have authority to guarantee bonds or undertakings on appeal, subject to judicial approval.

The act has necessarily so far modified the provisions of the Code of Civil Procedure, requiring two sureties in such an undertaking, as to dispense with them when a guaranty of this description may be given.

It is error for the court to refuse to permit the plaintiff to examine the officer of the company as to its liability to enter into and make the guaranty before approving or disapproving of the undertaking.

First Department, General Term, July, 1884.

Before DAVIS, P. J., BRADY and DANIELS, JJ.

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